ABSTRACT
Measures to increase the scope and effectiveness of non-shareholder participation –improving the flow of information, mandatory consultation, and broadening directors’ fiduciary duties – can be regarded as a form of regulation of corporate conduct supplementary to more conventional techniques.76 They are a response to limitations in the ability of traditional legal controls to bring corporate behaviour into line with society’s expectations.77 The problems include the inevitable delay in the legal response to new sources of harm, deficiencies in the information available to standard-setters, and the inability of law to educe the highest standards of performance, as distinct from securing compliance with base line, minimum standards. As well as problems of encapsulating desired controls in law, there may be failures in the democratic process itself. Legislators may give insufficient weight to the interests of those directly affected by damaging corporate activities, for example, or otherwise pay too little attention to the popular view. In the international context, the inadequacies of supranational rule making and enforcement agencies and the laxity of local laws may mean that companies are free to engage in conduct overseas which is regarded as unacceptable in the company’s country of origin. Increased participation may, then, be seen as a means of compensating for the regulatory deficit that results from these various shortcomings in the capacity of external legal rules to modify anti-social corporate behaviour.
